Question

ABC Co p any pr tu es Product X Product Y and Product Ζ. All three products requre processing on specia ized finishing machines. The capatty of these mach es s 210 hours er m m Company wants to determine the product mix that should be achieved to meet the high demand for each product and provide the maximum proft. Folowing ls information atout each product ABC Product XProduct Y Selling price $149 105 $118 50 s 35 Variable costs Machine time per unit Monthly demand (units) 27 3 hours 3 nours 1 hour 410 300 760 Required: Determine how the 2,130 hours of machine time should be allocated to the three products to provide the most profitable product mix. (Do not round intermediate calculations.) Product Y Product Z

Answer 1

	Product X	Product Y	Product Z
Selling price	149	118	35
Variable costs	105	60	27
Contribution margin	44	58	8
Machine time per unit	3	3	1
Contribution margin per machine time	14.67	19.33	8.00
Ranking	II	I	III

As No. of Machine Hours is a constraint and it's allocated in following manner so that profit can be maxmised
Allocation:-
Product	Monthly Demand	No. of Hours P.U.	Total Hours	Commu. Hrs.
Y	300	3	900	900
X	410	3	1230	2130
Z	0	1		-

Therefore
Product	Allocated Machine Time
X	2130	Hours
Y	900	Hours
Z	0